Aug 16, 2017

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

• Canary watch: Valuation advisor Murray Devine is out with a new first-half private equity report, which shows that buyout firms continue to pay up for blue-chip assets but have become gun-shy when it comes to question marks. Key line: "Deal volume and valuation trend lines have begun to diverge, a tendency that's typically more common near the end of a market cycle."

  • Swiss consulting firm Wellershoff & Partners this week released new research hitting on a similar theme, arguing that the large-cap U.S. private equity market is way over-capitalized when compared to disbursement activity. Moreover, it believes it is understating the problem, given the boom in private equity's shadow capital market of big sovereign wealth funds and others who are diving deep into both private equity directs and co-invests. It suggests one solution would be for large-cap firms to cut existing fund sizes or break them up into smaller sub-funds – something we saw over-capitalized VC firms do in 2001/2002–- but acknowledges that such an outcome is highly unlikely.

• Trumpland: Michael Dell, CEO of Silver Lake-backed Dell EMC, and BlackRock CEO Larry Fink both reaffirmed that they will remain on presidential economic councils.

  • Bridge to nowhere: Yesterday's presidential press conference was supposed to be about infrastructure, the construction and maintenance of which likely would involve many union workers. It resulted in two union leaders breaking ties with the White House.
  • Dell statement, which came after President Trump re-equivocated on the weekend's events in Charlottesville.
  • Fink's letter to employees, which came earlier.

• As Uber turns: Uber shareholder and Sherpa Capital co-founder Shervin Pishevar sent a letter to Benchmark Capital late last night, reiterating his request that the VC firm divest from Uber and leave its board of directors. Included were claims that Benchmark has been working in cahoots with Chris Sacca's Lowercase Capital – not surprising, given that Lowercase signed off on asking Travis Kalanick to resign – and that Benchmark wants Arianna Huffington booted from the Uber board alongside Kalanick (again, no surprise, given Huffington's close relationship with Kalanick).

• Publishing note: Pro Rata will be dark next week, as I'm taking a week off to do some summer stuff with the family. So if you've got interesting stuff to tell me – such as anonymous scoop via http://axios.com/tips – now would be a good time to do so...

The BFD

The Blackstone Group has ended talks to acquire a 40% stake in Israeli cybersecurity company NSO Group for around $400 million, Reuters reports. The deal, which also would have involved a 10% stake purchase by ClearSky, was expected to provide a partial exit for current NSO majority owner Francisco Partners. An NSO spokesperson says the company is not currently involved in an investor talks.

  • Why it's the BFD: As we've discussed previously, NSO is the company whose software was allegedly used by the Mexican government to spy on opposition lawmakers, journalists and human rights lawyers (something that Mexican President Peña Nieto denies). It also once employed former U.S. National Security advisor Michael Flynn as a paid advisor. Blackstone's possible involvement had sparked some complaints from digital privacy advocates, although it's unclear if those efforts contributed to Blackstone's decision to back away.
  • Bottom line: "Serious investors who have done their due diligence may be thinking twice about just how problematic this category of investments could be to their image and their bottom line." – Citizen Lab researcher John Scott-Railton, via Reuters.
Venture Capital Deals

• Puls (f.k.a. CellSavers), a San Francisco-based on-demand smartphone and tablet repair service, has raised $25 million in new VC funding. Red Dot Capital Partners led the round, and was joined by Samsung Next, Maverick Ventures, Kreos Capital and return backers Sequoia Capital and Carmel Ventures. http://tcrn.ch/2x0UEcD

🚑 Artemis Health, a Salt Lake City-based benefit optimization data platform for employers, has raised $16 million in Series B funding. F-Prime Capital led the round, and was joined by return backers Maverick Ventures and Kickstart Seed Fund. This comes just months after the company announced $8.3 million in Series A funding. www.artemishealth.com

• HiScene, a Beijing-based developer of AR hardware and software, has raised around $14 million in Series B funding. Shanghai Cableway Investment led the round, and was joined by Meitu, Sincere Capital and Vstar Capital. http://axios.link/NrZu

• Haiyun Data, a Beijing-based provider of enterprise data visualization solutions, has raised around $14 million in Series B funding. IDG Capital and Jingsheng Jiacheng Investment co-led the round, and were joined by Oriental Fortune Capital and Shanggu Capital. http://axios.link/9N3i

• Phil Inc., a San Francisco-based end-to-end prescription management and delivery service, has raised $10 million in new VC funding. Crosslink Capital led the round, and was joined by Eniac Ventures, Softtech VC, Forerunner Ventures, SV Angel, Silicon Valley Bank and Transmedia Capital. www.phil.us

• Filld, a Mountain View, Calif.-based mobile fueling service for both individual and commercial customers, has raised $9.65 million in Series A funding. Shea Ventures led the round, and was joined by Cedana Capital and return backers PivotNorth Capital, Javelin Venture Partners, Lightspeed Venture Partners and Lucas Venture Group. www.filld.com

• NuOrder, a West Hollywood, Calif.-based wholesale optimization platform for the fashion industry, has raised $8 million in new VC funding. Argentum led the round, and was joined by return backers Upfront Ventures, Greycroft Partners, Cowboy Ventures, Box Group and Novel TMT. http://axios.link/e0xW

• OneSignal, a San Francisco-based push notification delivery platform, has raised $7 million in Series A funding led by SignalFire. http://tcrn.ch/2i2kgmO

• Tianjin YangTian Technology, a Chinese developer of industrial robotics, has raised around $7 million in Series A funding. Lenovo Capital and the Incubator Group co-led the round, and were joined by GSR Ventures and Yinxinggu Capital. http://axios.link/jru1

🚑 Flo Health, a women's health platform known for its period-tracking app, has raised $5 million in Series A funding led by Flint Capital. http://axios.link/qmY0

🚑 Happify, a New York-based behavioral health assessment platform, has raised $5 million in new VC funding led by TT Capital Partners. http://axios.link/L3Wt

• Lightneer, a Finnish gaming studio, has raised $5 million in seed funding. GSV Acceleration led the round, and was joined by IPR.vc, Brighteye VC and Reach Capital. http://axios.link/L9zJ

• Minibar Delivery, a New York-based online marketplace for alcohol, has raised $5 million in new VC funding. Corgin Ventures led the round, and was joined by Female Founders Fund, Winklevoss Capital, LaunchCapital and RiverPark Ventures. http://tcrn.ch/2i2l0IO

• Smilio, a direct-to-consumer baby products brand, has raised $3.25 million in seed funding from Brand Foundry and Norwest Venture Partners. http://tcrn.ch/2uXG4RG

Private Equity Deals

• H.I.G. Capital has completed its $283 million acquisition of NCI, a Reston, Va.-based IT and professional services company for federal agencies like the U.S. Department of Defense. http://axios.link/YhsP

• The Results Cos., a Fort Lauderdale, Fla.-based business process outsourcing company owned by One Equity Partners, has acquired call-center services business USA800 for an undisclosed amount. www.theresultscompanies.com

• Rotunda Capital has acquired IF&P Foods, an Indianapolis-based distributor of produce, dairy and flowers. No financial terms were disclosed. www.rotundacapital.com

Public Offerings

• Despegar.com, an Argentina-based online travel booking site, has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol DESP, with Morgan Stanley and Citigroup serving as lead underwriters. The company reports around $18 million in net income on $248 million in revenue for the first half of 2017. Shareholders include Tiger Global (57.3% pre-IPO stake), Expedia (16.4%) and General Atlantic (5.4%).

• MongoDB, a New York-based open source database system, has confidentially filed for an IPO, according to TechCrunch. The company has raised over $300 million in VC funding, most recently at a post-money valuation of around $1.7 billion, from firms like Sequoia Capital, NEA, Fidelity, Altimeter Capital Management and T. Rowe Price. http://tcrn.ch/2vGr6Sj

🚑 Zai Lab, a Shanghai-based developer of drugs for the China market, has filed for a $115 million IPO. It plans to trade on the Nasdaq under ticker symbol ZLAB, with J.P. Morgan as the left lead underwriter. Shareholders include Kleiner Perkins Caufield & Byers, OrbiMed Advisors, Vivo Capital, Cormorant Pharmaceuticals and Rock Springs Capital. www.zailaboratory.com

Liquidity Events

• Mashable, a New York-based tech news site, has hired LionTree Advisors to find a buyer. Around five years ago, the company held failed talks to be acquired by CNN. Mashable has raised nearly $60 million in VC funding from backers like Time Warner Investments, Updata Partners and R&R Venture Partners – most recently at a post-money valuation of around $200 milion. https://bloom.bg/2x3TXiX

• Microsoft (Nasdaq: MSFT) has agreed to acquire Cycle Computing, a Stamford, Conn.-based provider of cloud orchestration solutions, for an undisclosed amount. Cycle Computing backers include Western Technology Investment and WorldQuant Ventures. http://zd.net/2vYZyKm

• Netsertive, a Morrisville, N.C.-based marketing technology company, has acquired Mixpo, a Seattle-based creative management platform. No financial terms were disclosed. Netsertive has raised around $38 million in VC funding from RRE Ventures, Babson Capital Management, Harbert Management, Harbert Venture Partners and Greycroft Partners. Mixpo had raised around $10 million from Madrona Venture Group, Growthworks Capital and Yaletown Venture Partners. http://axios.link/amMw

• Summit Park has sold Control Co., a Webster, Texas-based provider of private label and branded lab equipment, to Cole-Larmer. No financial terms were disclosed. www.coleparmer.com

• Wynnchurch Capital has sold Senco Brands, a Cincinnati-based maker of fasteners and tools for the powered fastening industry, to Kyocera Corp. (NYSE: KYO) for an undisclosed amount.

More M&A

• Air Belin, Germany's second-largest air carrier, has filed for bankruptcy protection. http://reut.rs/2fKBbJY

• Elliott Management has increased its stake in mining giant BHP Billiton (ASX: BHP) to 5%. http://reut.rs/2uOeYxv

• KeyBanc Capital Markets, a unit of KeyCorp (NYSE: KEY), has agreed to acquire New York-based healthcare investment bank Cain Brothers & Co. No financial terms were disclosed. http://axios.link/zfHl

• Prudential (LSE: PRU) has agreed to sell its U.S. broker-dealer network to LPL Financial (Nasdaq: LPLA) for $448 million. http://reut.rs/2vDlg5V

Fundraising

• Charlesbank Capital Partners is targeting $2.75 billion for its ninth flagship buyout fund, plus another $700 million for an overage fund, per Massachusetts pension fund docs.

• KKR is developing a customized private equity portfolio for insurer Aflac (NYSE: AFL), according to Bloomberg. https://bloom.bg/2weQl07

It's Personnel

• Deutsche Bank has promoted global equities head Tom Patrick to CEO of the Americas, according to an internal memo spotted by the WSJ. He succeeds Bill Woodley, who is leaving the company. http://on.wsj.com/2v16Poq

• Ron Liberman has joined Chicago-based private equity firm Wind Point Partners as director of IR, marketing and communications. He previously was with Sterling Partners. www.windpointpartners.com

• S. Brian Mukherjee has joined Periscope Equity as a partner. He had been an executive advisor to the private equity firm since it was launched, and most recently served as CEO of RhythmOne plc (LSE AIM: RTHM). www.periscopeequity.com

• Nicole Sanchez, co-founder and CEO of Credit Hero, has joined female founder-focused seed fund XFactor Ventures. www.xfactor.ventures

Dan Primack